An income elasticity between 0 and +1 indicates a normal good, where the quantity demanded increases at the same or a lesser rate than the increase in income. For example, a good where a 10% increase in income results in a 0-10% increase in consumption would be considered a “normal” good.
An income elasticity greater than +1 indicates what economists call a luxury good, where consumption increases by a greater proportion than income. For example, as discretionary incomes rise consumers can afford to buy higher quality and/or leisure related goods that were previously beyond their reach. This does not mean these goods are the exclusive preserve of the rich, but that as living standards rise consumers value buying these goods the most. It is a measure of a highly valued good in consumer welfare terms.
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